The Advantages of Key Performance Indicators in Construction

Key performance indicators (KPIs) are financial and operational goals used to measure the success of a company. Each business industry has a different set of KPIs companies use to measure their success. In the construction industry, companies may use indicators like the number of safety incidents in a specified time period, profitability of construction jobs or reviewing the cost of construction materials against the predetermined budget. These indicators may create a competitive advantage because they have a deeper knowledge of their operations, allowing them to price future contracts more competitively than competitors.

·         Improve Operations

KPIs help managers to find weak areas in their operations that can be improved, leading to faster construction completion times and fewer employee safety incidents. Because companies can only bill clients at specified times during the construction process, shorter construction times allow them to recoup their money quicker. Companies can also bid on projects simultaneously, giving them an opportunity to have more construction projects in the pipeline, increasing future profitability.

Measuring the number of safety incidents at each job site is also important, since employee safety violations slow down the construction progress on the job site. Companies may also earn financial rewards by having a strong employee safety record.

·         Increase Project Flexibility

Constructions companies who use KPIs in their operations usually have more flexible operations than their competitors. Construction managers keep information on the lead time needed to order supplies, hire additional labor and the time it takes to finish certain construction projects; manager use this information when managing multiple projects and moving equipment between construction sites. Companies also need to plan for shortages or errors in the construction process. KPI measurements can be used to gather information regarding vendors and suppliers, giving managers the option of having a backup plan if the original supplier cannot fill materials orders in time for starting construction.

  Better Job Costing Processes

Once construction projects are completed, companies usually audit the project to determine how well they managed the construction process and predetermined budget. This audit process allows managers and project accountants to determine where savings opportunities exist in their construction operations. Understanding the money spent on previous projects helps managers to bid for new construction opportunities by properly accounting for all materials and labor costs.

Managers may also use the audit process to find cost overruns and wasteful spending by construction foremen. Incidental spending on construction projects may quickly added up, indicating costs not planned for in the budget process.

We are Chartered Accountants helping small to medium businesses with a specialty of understanding the space that relates to the Building and construction industry. For more information about our services contact us on 9597 9966 or 563 North Road Ormond Victoria 3204 Australia